Describe Some of the Sources of Business Risk and Financial

question 29

Essay

Describe some of the sources of business risk and financial risk. Do financial decision makers have the ability to "trade off" one type of risk for the other?

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Definitions:

Average Returns

Refers to the mean financial return of an investment over a specified period, which includes dividends, interest, and capital gains.

Standard Deviation

A statistical measure that quantifies the amount of variability or dispersion around an average.

Capital Markets

Financial markets where long-term debt or equity-backed securities are bought and sold, facilitating the raising of capital.

Risk And Return

The principle that the potential return on any investment is directly correlated with the amount of risk taken; higher risks typically offer the chance for greater rewards.